What was the primary driver of revenue growth in the first quarter of 2005?

The primary driver of revenue growth was the strong performance in the Moody's Investors Service segment, particularly in U.S. structured finance (driven by residential mortgage and home equity loan sectors) and European corporate finance. The Moody's KMV segment also contributed positively.

How did stock-based compensation affect the company's expenses and profitability?

Stock-based compensation expense increased significantly year-over-year, contributing to higher operating, selling, general, and administrative expenses. This increase was partly due to the adoption of the fair value method for stock-based compensation and an accelerated expensing charge for employees nearing retirement eligibility. While it impacted operating margins, net income still showed strong growth.

What is the company's outlook for the remainder of 2005?

Moody's expects overall revenue growth in the 7% to 10% range for the full year 2005, with some deceleration expected in the latter half of the year. While certain U.S. markets like residential mortgage-backed securities are projected to decline, growth is anticipated in other areas and internationally. Diluted earnings per share are expected to grow between 14% to 16%.

Are there any significant legacy legal or tax matters that investors should be aware of?

Yes, Moody's has ongoing legacy tax matters with potential exposures estimated up to $341 million, and it continues to establish reserves for these matters. The company also has exposure to the Information Resources, Inc. antitrust lawsuit, though the VNU Parties have assumed primary liability. While management believes these matters will not materially adversely affect the company's financial position, resolution amounts could be higher than currently reserved, and investors should monitor these disclosures.

MCO 10-Q Quarterly Report Q1 FY2005 — Revenue, Net Income, EPS

Summary

Moody's Corporation (MCO) reported strong financial results for the first quarter of 2005, with revenue increasing by 17.9% year-over-year to $390.5 million. This growth was primarily driven by robust performance in its Moody's Investors Service segment, particularly in U.S. structured finance and European corporate finance, as well as solid contributions from its Moody's KMV segment. Net income saw a healthy increase of 14.7% to $118.7 million, translating to diluted earnings per share of $0.78. The company's operating income also grew significantly, though its operating margin slightly decreased year-over-year due to increased investments in compensation and stock-based compensation expenses. Moody's maintained a strong liquidity position with a substantial increase in cash and cash equivalents. The company also provided a positive outlook for the full year 2005, anticipating continued revenue and earnings growth despite some expected deceleration in certain business lines.

Key Highlights

1Revenue increased by 17.9% to $390.5 million in Q1 2005 compared to Q1 2004.
2Net income rose by 14.7% to $118.7 million, with diluted EPS at $0.78.
3Moody's Investors Service (MIS) revenue grew 18.4%, driven by structured finance and research.
4Moody's KMV (MKMV) revenue increased by 12.6%, showing growth in credit decision software.
5Operating income increased by 16.2% to $212.5 million.
6Cash and cash equivalents significantly increased to $777.0 million.
7The company expects full-year 2005 revenue growth in the 7% to 10% range.

MOODYS CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2005

Summary

Key Highlights

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